CIE IGCSE Business Studies - Unit 6: External Influences on Business Issues

Inflation

increase in the average price level of goods and services over time.

Unemployment

when people who are willing and able to work cannot find a job.

Economic Growth

When a country's Gross Domestic Product increases - more goods and service are produced than in the previous year.

Balance Of Payments

Records the difference between a country's exports and imports.

Real Income

The value of income and it falls when prices rise faster than money income.

gdp

The total value of output of goods and services in a country in one year.

Growth

This is when GDP is rising, unemployment is generally falling and the country is enjoying higher living standards. Most businesses will do well at this time.

Boom

This is caused by too much spending. Prices start to rise quickly and there will be shortages of skilled workers. Business costs will be rising and firms will be uncertain about the future.

Recession

A period of falling Gross Domestic Product.It is often caused by too much spending. Most businesses will experience falling demand and profits and workers may lose their jobs.

Slump

A serious and long-drawn out recession. Unemployment will reach very high levels and prices may fall. Many businesses will fail to survive in this period.

Exports

Goods and services bought in by one country from other countries.

Imports

Goods and services bought in by one country from other countries.

Exchange Rates

the price of one currency in terms of another.

Exchange Rate Depreciation

the fall in the value of a currency compared with other currencies.

Exchange Rate Appreciation

rise in the value of a currency compared to other currencies.

Fiscal Policy

any change by the government in tax rates or public-spending.

Direct Taxes

taxes paid directly from incomes, for example, income tax or profit tax.

Indirect Taxes

taxes added to the prices of goods and taxpayers pay the tax as they purchase the goods.

Disposable Income

the level of income a taxpayer has after paying income tax.

Import Tariff

tax on an imported product.

Import Quota

physical limit to the quantity of a product that can be imported.

Monetary Policy

a change in interest rates by the government or central bank.

Supply Side Policy

mainly micro-economic policies aimed at making markets and industries operate more efficiently and contribute to a faster underlying-rate of growth of real national output.

Social Responsibility

Is when a business decision benefits stakeholders other than shareholders, for example, a decision to protect the environment by reducing pollution by using the latest and 'greenest' production equipment.

Environment

Is our natural world, including, for example, pure air, clean water and undeveloped countryside.

Global warming

is a gradual increase in the overall temperature of the Earth's atmosphere, generally thought to be caused by increased levels of carbon dioxide, CFCs, and other pollutants in the atmosphere.

Private costs

the costs paid for by the business

Private benefits

of an activity are the gains to a business.

External costs

Are costs paid for by the rest of society, other than the business, as a result of business activity.

External benefits

Are the gains to the rest of society, other than the business, resulting from business activity.

Social costs

External costs + Private costs

Social benefits

External benefits + private benefits

Sustainable development

The development which does not put at risk the living standards of future generations.

Sustainable production methods

Are those that do minimum damage to the environment.

Pressure group

made up of people who want to change business (or government) decisions and they take action such as organising consumer boycotts.

Consumer boycott

It is when consumers decide not to buy products from businesses that do not act in a socially responsible way.

Ethical decisions

decisions based on moral code. Sometimes referred to as 'doing the right thing'.

Globalisation

The increase in worldwide trade and the movement of people and capital between countries

Free trade agreement

When countries agree to trade freely without tariffs or quotas

Import quota

Restriction on the quantity of a product that can be imported

Protectionism

Creating import taxes, quotas, permits and laws to control activities of foreign companies

Multinational Businesses

Businesses with factories, production, or service operations in more than one country

Exchange rate

Price of one currency in terms of another e.g. 1 euro=1.5 dollars

Currency Appreciation

When the value of a currency rises. Buys more of the other currency than before

Currency Depreciation

When the value of a currency falls. Buys less of another currency

Common Currency

When a group of countries agree to use the same currency

Economic Union

Agreements between countries to trade freely with each other. between two or more nations to allow goods, services, money and workers to move over borders freely. Example is European Union